Downsizing Reduces Loan Size While Company Survives

Construction & Real EstateLitigation SupportPerformance ImprovementTurnarounds & Restructuring

30M

Annual Sales

6M

in Debt

Mid-Way Supply, Zion Illinois

Challenge

Distributor of HVAC equipment. Revenues $30 million, down from $47 million. $6 million debt. Owner leveraged company to buy out family members at height of market. Vendor representing 70% of the business also a secured lender in the inventory.

  • Effort to maintain revenues resulted in increased credit risk, slow pay and many customers eventually going out of business.
  • Inventory held at historically high levels even in face of revenue declines.
  • Buyout of family members allowed sales and marketing functions to languish.
  • Bank’s $10 million note was deemed to be at significant risk.

Solution

  • Owner removed from day-to-day decision making and MorrisAnderson installed as CRO to help management.
  • Forbearance agreement with Senior Lender.
  • Aggressive, market-oriented inventory management system put in place.
  • Implemented professional sales and marketing program.
  • Installed professional collections procedures and policies.

Results

  • Senior Lender and key vendors supported turnaround process.
  • Inventory rationalization reduced inventory by 35% in four months at no margin loss.
  • Professional marketing and sale performance grew the customer base in a direction of more professional, faster growing customers.
  • Lender paid down $7.4 million versus initial recovery estimate of $4.5 million.